Question

which liabilities is paid first of all after the sale of assets
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Answer 1

Answer:

In case of dissolution of firm, all assets and liabilities are transferred to Realization Account. Amount received against the sale of assets will be credited to realization account and amount paid against any liability should be debited to realization account.

Accounting entries will be as under:

Transfer of assets to realization account:

Realization A/c Dr.

To Assets Account

Sale of Assets:

Bank Account Dr.

To Realization Account

Answer 2

Answer:

According to Section 507 of the Bankruptcy Code, a corporation's creditors must be paid in a certain sequence when it is liquidated in the United States.

The highly particular order in which credits are awarded was created to safeguard people who have a direct stake in the assets of the liquidated party.

The process of closing a firm and transferring its assets to claimants is known as liquidation. All of the company's physical property and equipment, as well as any remaining cash, are considered assets, as is any money obtained from the sale of those items. When a business becomes insolvent—that is, unable to make its debt payments as they fall due—it must be liquidated.

• All of a company's assets are allocated to its creditors in the event of liquidation according to a predetermined priority sequence.
• Creditors who have secured claims on assets are given priority since these claims are frequently backed by collateral and contracts.
• Multiple liens may be issued on some assets; in these circumstances, the first lien takes precedence over the second lien.
• As some unclaimed creditors, such as workers and tax authorities, are given precedence, unsecure creditors are classified into preferred and non-preferred categories.
• Shareholders frequently get money last in line, with preferred stock holders receiving preferential treatment over regular stockholders.

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